In 2015 data from the National Credit Regulator (NCR) showed that 45% of credit active South Africans are struggling to make their monthly repayments. According to Beth Kobliner, author of the New York Times bestseller Get a Financial Life, a lot of Americans also struggle to manage their money.
“Look at the mortgage crisis and how many families lost their homes — 3.9 million foreclosures. Look at the amount of money — $1.1 trillion—we owe in student loan debt. The amount — $845 billion — we owe in credit card debt. It’s pretty clear that adults don’t know much about money,” she told Forbes.
Kobliner said it is vital to teach the next generation about money so as to avoid making the same mistakes.
Once your children are at an appropriate age, instill in them our Top 5 money principles:
1.Teach your children how to budget
It sounds a little dramatic seeing as this is something grownups are burdened with. However, if you teach your kids to budget early on, they will be more likely to live within their means as adults.
In order for them to budget they need to earn money i.e. an allowance in exchange for small tasks. Next, they need to have expenses of their own for e.g. tuck-shop money, airtime, trips to the movies etc.
Tip: Download a budgeting app to make it more interactive and fun.
2.Teach your children to save for something they want
It is hard to wait for something you’ve put your heart on, irrespective of your age. That is why as adults we run into debt so quickly. Teach your children to make saving goals, and help them to save towards them.
Yes, there is a time and place for gift giving. However, beware of giving your kids everything they want, because you could be setting them up for disappointment. According to well-known American psychologist and television personality Dr. Phil, a parent’s primary role is to prepare their children for the real word. In an article entitled Stop spoiling your kids, Dr. Phil says: “In the real world, you don’t always get what you want. You will be better able to deal with that as an adult if you’ve experienced it as a child.”
Remember: Let your children see you say no to the things you want but can’t afford either.
3.Teach your children the right attitude towards money
A lot of the feelings children have towards money are often picked up from their parents’ attitude towards it. Therefore be sensitive to what you say and do in front of them.
A study done by Money Advice Service (MAS) in America, indicates that most children form their financial habits as early as age seven.
“This study really demonstrates the power of parental influences, and illustrates how much of what you learn and absorb when you are young, both consciously and subconsciously, affects the choices you make throughout the rest of your life,” Caroline Rookes, CEO at MAS said.
4.Teach your children the value of money
Be more open about the prices of things. A teenager for example should see how you shop for competitive prices, and if you are shopping for something for them, like a new pair of jeans or a cellphone, get them involved. Children need to know that it isn’t embarrassing to shop for discounts or sales, and getting more value from your rand is essential.
5.Teach your children about debt and other money pitfalls
Educate your children about the difference between a debit and a credit card. Also explain the distinction between good and bad debt and talk about interest and what it means.
Money should always be an open discussion in your home where children feel they can ask you anything. Because over time this knowledge will make them money savvy adults aware of all the pitfalls.